N.Y. Insurance Law § 7802: Definitions

§ 7802. Definitions. In this article:

(a) "Accredited investors" shall be as defined in regulation D, rule

501 of the Federal Securities Act of 1933, as amended.

(b) "Advertisement" means any written, electronic or printed

communication or any communication by means of recorded telephone

messages or transmitted on radio, television, the Internet or similar

communications media, including film strips, motion pictures and videos,

published, disseminated, circulated or placed before the public,

directly or indirectly, for the purpose of creating an interest in or

inducing a person to purchase, sell, assign, devise, bequest or transfer

the death benefit or ownership of, a life insurance policy or an

interest in a life insurance policy pursuant to a life settlement

contract.

(c)(1) "Business of life settlements" means an activity involving, but

not limited to, offering to enter into, soliciting, negotiating,

procuring, effectuating, monitoring, or tracking life settlement

contracts.

(2) For purposes of this article, "business of life settlements" shall

also include:

(A) such acts or transactions effectuated in this state by mail or

otherwise from outside this state; and

(B) doing or proposing to do any business in substance equivalent to

the business of life settlements in a manner designed to evade the

provisions of this chapter.

(d) "Compensation" means anything of value, including money, credits,

loans, interest on premium, forgiveness of principal or interest,

vacations, prizes, gifts or the payment of employee salaries or

expenses, whether paid as commission or otherwise.

(e) "Financing entity" means an accredited investor:

(1) whose principal activity in connection with the transaction is

providing funds to effect the life settlement contract or to purchase

one or more policies; and

(2) who has an agreement in writing with a life settlement provider to

finance the acquisition of a life settlement contract.

(f) "Financing transaction" means a transaction in which a licensed

life settlement provider obtains financing from a financing entity,

including any secured or unsecured financing, any securitization

transaction, or any securities offering which is registered or exempt

from registration under federal and state securities laws.

(g) "Insured" means a person covered under a policy that is or may be

the subject of a life settlement contract.

(h) "Insurer" means a life insurance company or a fraternal benefit

society.

(i) "Life expectancy" means the arithmetic mean of the number of

months the insured can be expected to live taking into consideration

medical records and appropriate experiential data.

(j) "Life settlement broker" means a person who, for compensation,

solicits, negotiates or offers to negotiate a life settlement contract;

except that such term shall not include a licensed life settlement

provider, or representative thereof, licensed attorney at law, certified

public accountant, or financial planner that is accredited by a

nationally recognized accreditation agency acceptable to the

superintendent, who is retained in his or her professional capacity,

does not advertise as being in the business of life settlements and is

compensated without regard to whether a life settlement contract is

effectuated.

(k)(1) "Life settlement contract" means an agreement establishing the

terms under which compensation is provided to an owner, which

compensation is less than the expected death benefit of the policy, in

return for the assignment, transfer, sale, release, devise or bequest of

any portion of:

(A) the death benefit;

(B) the ownership of the policy; or

(C) any beneficial interest in the policy, or in a trust or any other

entity that owns the policy, where a primary purpose of the transaction

is to acquire the policy.

(2) "Life settlement contract" shall include an agreement, entered

into after the effective date of this article, described in paragraph

one of this subsection regardless of the date the compensation is

provided and regardless of the date the assignment, transfer, sale,

devise or bequest is effectuated.

(3) "Life settlement contract" shall not include:

(A) an assignment of a policy as collateral for a loan by any

depository institution insured by the Federal Deposit Insurance

Corporation or the National Credit Union Administration;

(B) an assignment of a policy as collateral for a loan made by a

licensed financial institution under which the lender takes an interest

in a life insurance policy solely to secure repayment of a loan or, if

there is a default on the loan and the policy is transferred, the

transfer of the policy by the lender, provided that the default itself

is not pursuant to an agreement or understanding with any other person

for the purpose of evading regulation under this article;

(C) an assignment of a policy as collateral for a loan made by a

lender that does not violate article twelve-B of the banking law;

(D) the making of a policy loan, or the paying of surrender benefits

or other benefits, by the issuer of a policy with respect to that

policy;

(E) an exchange of life insurance policies in a transaction described

by section 1035 of the Internal Revenue Code of 1986, as amended;

(F) an agreement made by an individual to take an assignment,

purchase, or otherwise receive the death benefit or ownership of any

portion of a policy or policies on the life of a single insured or lives

of joint insureds; provided that, in a calendar year, the individual

enters into no other agreement to take an assignment, purchase, or

otherwise receive the death benefit or ownership of any portion of a

policy or policies on the life of any other insured or lives of any

other joint insureds;

(G) an agreement to assign, transfer or pledge a settled policy, or

any interest therein, to a licensed life settlement provider, an

accredited investor or qualified institutional buyer, financing entity,

special purpose entity, or related provider trust;

(H) an agreement where all the parties are closely related to the

insured by blood or law or have a lawful substantial economic interest

in the continued life, health and bodily safety of the person insured,

or are trusts established primarily for the benefit of such parties;

(I) any designation, consent or agreement by an insured who is an

employee of an employer in connection with the purchase by the employer,

or trust established by the employer, of life insurance on the life of

the employee;

(J) a bona fide business succession planning arrangement between:

(i) one or more shareholders in a corporation or between a corporation

and one or more of its shareholders or one or more trusts established by

its shareholders;

(ii) one or more partners in a partnership or between a partnership

and one or more of its partners or one or more trusts established by its

partners; or

(iii) one or more members in a limited liability company or between a

limited liability company and one or more of its members or one or more

trusts established by its members;

(K) legitimate corporate or pension benefit plans, as determined by

the superintendent; or

(L) any other agreement that the superintendent determines is

substantially similar to any of the foregoing.

(l) "Life settlement intermediary" means a person who maintains an

electronic or other facility or system, for the disclosure, through a

forum of offers and counteroffers, to sell or purchase a policy pursuant

to a life settlement contract; and delivers to:

(1) a life settlement provider an offer from a life settlement broker

or owner to sell a policy; or

(2) an owner or life settlement broker an offer from a life settlement

provider to purchase a policy.

(m) "Life settlement provider" means a person who enters, or offers to

enter, into a life settlement contract with the owner.

(n) "Owner" means the owner of a policy who enters or seeks to enter

into a life settlement contract.

(o) "Person" means any natural person or legal entity, including a

partnership, limited liability company, association, trust or

corporation.

(p) "Policy" means an individual or group life insurance policy or

certificate.

(q) "Premium finance loan" means a loan made for the purposes of

making premium payments on a life insurance policy, which loan is

secured by an interest in such life insurance policy.

(r) "Qualified institutional buyer" shall be as defined in rule 144A

of the Federal Securities Act of 1933, as amended.

(s) "Related provider trust" means a trust established by a licensed

life settlement provider or a financing entity for the sole purpose of

holding the ownership or beneficial interest in settled policies in

connection with a financing transaction; provided that the trust has a

written agreement with the licensed life settlement provider under

which:

(1) the licensed life settlement provider is responsible for ensuring

compliance with all statutory and regulatory requirements; and

(2) the trust agrees to make all records and files relating to life

settlement transactions available to the superintendent as if those

records and files were maintained directly by the licensed life

settlement provider.

(t) "Settled policy" means a policy that at any time has been acquired

by a life settlement provider pursuant to a life settlement contract.

(u) "Special purpose entity" means a corporation, partnership, trust,

limited liability company, or other legal entity formed solely to

provide, either directly or indirectly, access to institutional capital

markets for a financing entity or licensed life settlement provider.